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Organisational design and the challenge to HR

04 Apr 2018

Matthew Hudson has over 20 years’ experience of organisational design (OD), most recently at the London Stock Exchange Group. He sat down with Tim Baker, Consultant in the HR Practice at Odgers Berndtson London, to discuss the role of OD in a world of constant change that demands rapid transformation.

Tim Baker: In the past two Deloitte Human Capital Reports, organisational design has trumped topics such as leadership development, people data and analytics as priorities. So we thought it’s important to get to grips with this subject that gets surprisingly little profile.

Matthew, could we begin with a brief definition of OD, and its evolution, please?

Matthew Hudson: Well, looking back, the shape of most organisations was a reflection of the personal preferences of its leader. It was the boss at the top, things were largely hierarchical and in a pretty constant state.

Fast-forward twenty years, and the world is a very different, more volatile and unpredictable place. Today, OD is an attempt to create a state of alignment between an organisation’s strategy, process, systems, technology and culture.

You might call it the operating system of the company, to borrow a term from the tech world. A re-organisation is like changing that system.

TB: How do you approach that change?

MH: Well, first, find out just how big the misalignment is between the organisation’s purpose and its structure. Often, the biggest mistake is ‘there’s a misalignment, let’s do a reorganisation’.

My approach is to ask, can you make what you have work, rather than change everything?

But really, the days of the big, top-to-bottom re-organisation are probably gone.

Rather, we are in a world where the organisation is likely to be in a constant state of evolution and flux, with an eye on a desired end state, making lots of adjustments along the way. It’s a series of gentle evolutions towards a strategic end-game.

I remember hearing a story, probably apocryphal, that spacecraft heading to the moon were actually off course something like 93% of the time, with lots of corrections keeping them true to their final destination. It’s a good analogy for business today in the environment we have to work in.

It’s no longer about the set-in-stone five-year plan, but something entirely more agile. Things are looser, with pools of capability grouped around specific processes, for example.

TB: Clearly, that affects the way leaders work within that more agile environment, and what’s expected of them?

MH: Yes. It’s now more about your purpose in the business and the KPIs expected of you. It’s not about rigid job descriptions, departments and skill sets.

These days, we’re more likely to be describing roles and the desired attributes of people, and their mindsets.

You’re hiring in a different way, based less on the position you’re filling and more on the outcomes you’re expecting.

The right person will be expected to figure out the best way to get things done, and be measured on some clear, agreed-up-front KPIs.

Leaders these days need to deal with ambiguity and be able to use their discretion to adapt to change in the business. Then, they might have lots of ‘bosses’ sometimes, and operate within different regulatory environments. Add geographical complexity, and managing that matrix is very demanding, to say the least.

This makes it vital that people are always fully-aligned with the greater goals and aims of the organisation, the values and beliefs of the organisation, and the management ethos.

If you can’t define the blueprint to the nth degree of detail – which most people can’t anymore because things are always changing - how do we teach people how to use their discretion to achieve the outcome that’s fully-aligned with the corporate strategy?

That’s a really challenging question when you’re trying to make a change in a monolithic organisation that needs to transform itself fast!

TB: What are the questions you ask before starting the OD process?

MH: Yes, I ask four things initially, to get an understanding. What’s the macro strategy? What is the ethos of the management? What problem are we solving? And then what would good look like – the ideal structure?

In a global context, you also have to consider the culture you’re working in too. There are clearly different ways that dominate ways of working. There can even be differences between the west and east coasts of America!

Take expectations about career development. In some cultures, it’s important to see plenty of steps up, so there need to be a number of visible promotions. In others, a few wide grades are fine.

Attitudes to change can vary enormously too, but really in all organisations these days you have to work to develop a more ‘nimble muscle’ within the organisation.

TB: What about the impact of technology, and even those unknowns that are coming down the track?

MH: Yes, of course, things like AI and automation have to be factored in.

We work on imagining and plotting out scenarios of the future, and so you have to think through how, for example, you get someone displaced by tech to step up to another level able to do an even more sophisticated role than they were doing before.

Or sometimes those scenarios can mean thinking about processes and who owns them. Can you promote more interdependent team working between different corporate functions?

Take the classic ‘joiner, mover, leaver’ process. In that, there are finance, property and facilities and HR people all running different processes to achieve the same outcome. What if that was a single team that managed the ‘joiner, mover, leaver’ experience, joining all those things together?

TB: Finally, why do so many organisations leave OD to outside consultants?

MH: Well, historically having an outsider maybe meant more of a challenge to the status quo and speaking truth to the business than if it was, say, the HR department. It bought you a more dispassionate brand of advice, so to speak. And consultants might have insight and data from other work within the business too.

I think increasingly people are starting to go internally for OD, though. I think, on balance, good in-house is better than good consulting. Partly because you do get involved in implementation, you have an intimate knowledge of the business, and you are there to witness the consequences of the changes. If those changes are not a ‘big bang’, but a number of small evolutions as is more likely, requiring a number of continuing conversations along the way, then it just makes sense to keep it in-house.

TB: I suppose that is a real challenge for the HR of the future to be properly strategic, and differently skilled?

MH: Yes, that’s true, and it is starting to happen, with the type of hires being made. People with strong strategic skills, strong on finance and analytics, good consulting skills, and, of course, excellent with people.

TB: Sounds like we need a new job title to reflect that! Thank you, Mathew, for your time and your insights.